World markets cautious after US rally

Solid corporate earnings reports and expectations that the weaker yen will enhance the bottom line of Japanese exporters also lured investors to stocks. Investors were also awaiting the release later in the day of U.S. factory orders for December.

In early European trading, Britain's fell 0.2 percent to 6,335.65. Germany's DAX was marginally higher at 7,834.47. France's CAC-40 was flat at 3,772.96. Wall Street appeared headed for a slightly higher open with Dow Jones industrial futures gaining almost 0.1 percent at 13,937. S&P 500 futures were nearly unchanged at 1,506.80.

Japan's Nikkei 225 was 0.6-percent higher at 11,260.35. Hong Kong's Hang Seng fell 0.2 percent to 23,685.01. South Korea's KOSPI edged down 0.2 percent to 1,953.21. Shares in mainland China were mixed and Australia's S&P/ASX 200 declined 0.3 percent to 4,907.50.

Last week, the Dow Jones Industrial Average closed above 14,000 on Friday for the first time in more than five years as investors became less risk-averse following solid economic indicators from the U.S. and Europe.

U.S. government revised upward how many people were hired in the last two years — adding an upbeat note to earlier news that Europe saw a lower-than-expected unemployment rate in December.

These indicators help ease investor aversion for risky assets, assuring them that the U.S. economic recovery is not losing steam and that the slump in eurozone economic activity might be bottoming out.

Improved sentiment helped the Shanghai Composite Index rise 0.4 percent to close at 2,428.15.

“The mood is improving in Shanghai with the main index surpassing 2,400 as investors are less hesitant about betting on risks,” said Yun Hang-jin, a market analyst at Korea Investment Securities. “There are expectations that policies from China and other emerging markets will boost stock markets.”

Investors in Asian markets are also keen on the lunar New Year holidays starting this weekend, which could boost retail sales and increase inflow of Chinese tourists to neighboring countries.

Eyes will turn later in the week to China, which is due to release key data on inflation and trade ahead of the Chinese New Year public holiday. Australia's central bank will also announce the outcome of its policy setting meeting, with analysts expecting it to keep interest rates on hold.

On Sunday China's official purchasing managers' index for the increasingly important services sector posted a fourth-straight monthly rise in January, although its slim gain added to evidence that the global recovery is a modest one.

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